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Obama aides change their rhetoric on economy

WASHINGTON (AP) - One of President Barack Obama's economic advisers said Sunday that the economy is fundamentally sound, a striking reversal from the Democrat's campaign rhetoric as his administration now guides the nation's financial health amid dire conditions.

Obama's Democratic allies pleaded for patience for an administration hitting the two-month mark this week, while Republicans said the White House's plans ignore small business and the immediate need to fix what ails the economy.

During the fall campaign, Obama mercilessly mocked his Republican opponent, Sen. John McCain, for declaring, "The fundamentals of our economy are strong." Obama's team painted the veteran senator as out of touch and failing to grasp the challenges facing the country.

On Sunday, economic adviser Christina Romer was asked during an appearance on NBC's "Meet the Press" if the fundamentals of the economy were sound. "Of course they are sound," she replied.

"The fundamentals are sound in the sense that the American workers are sound, we have a good capital stock, we have good technology," she said. "We know that—that temporarily we're in a mess, right? We've seen huge job loss, we've seen very large falls in GDP. So certainly in the short run we're in a—in a bad situation."

Just a week ago, White House Office of Management and Budget director Peter Orszag declared that "fundamentally, the economy is weak." Days later, Obama told reporters he was confident in the economy.

"If we are keeping focused on all the fundamentally sound aspects of our economy, all the outstanding companies, workers, all the innovation and dynamism in this economy, then we're going to get through this," Obama said, striking an optimistic tone that his top aides mimicked during a week that saw Wall Street enjoy its best week since November.

Despite the new enthusiasm at the White House and on Wall Street, there was little solid evidence to suggest an end was in sight to the severe recession that has already cost 4 million American jobs, driven home values down and sent foreclosures soaring. Meanwhile, Chinese Premier Wen Jiabao said he was concerned about the safety of the estimated $1 trillion his country has invested in U.S. government debt.

Obama sought to downplay the worries.

"There's a reason why even in the midst of this economic crisis you've seen actual increases in investment flows here into the United States," Obama said Saturday after meeting with Brazilian President Luiz Inacio Lula da Silva. "I think it's a recognition that the stability not only of our economic system, but also our political system, is extraordinary.

The seesaw message from the new administration drew sharp criticism from Senate Republican leader Mitch McConnell, who said Obama's team was exploiting the economic situation for political gain.

"They're taking advantage of a crisis in order to do things that had nothing to do with getting us into the crisis in the first place," McConnell said.

Democratic lawmakers, meanwhile, promoted a potential plan to help move so-called toxic assets off bank ledgers.

"And I think, as I said, they are well along in this," said Rep. Barney Frank, D-Mass. "If they wait a week or two more, no one ought to get all in a twitter about that. It's very important to do it right."

The president's team largely rejected suggestions that officials were considering taxing employees' health benefits. As a candidate Obama had called such a proposal a "multitrillion-dollar tax hike."

"I'm not leaving the door open," said Austan Goolsbee, staff director of the Council of Economic Advisers, responding to a report in Sunday's New York Times. "The president has laid out a series of clear principles on the health plan that we will do whatever it takes to get affordable quality coverage to all Americans."

Romer said she wouldn't take the idea off the table, but she added that Obama hasn't supported it. Larry Summers, the president's chief economic adviser, said it wasn't part of Obama's principles but left open the possibility of such a move from Congress, where Democrats control both chambers.

Republicans were not resigned to accept Democrats' plans. Rep. Eric Cantor, the GOP's No. 2 leader in the House, promised an alternative budget, in part to counter Democratic attacks that his party provided only "no" but not other ideas.

Cantor said Obama's plan ignored the needs of small businesses and the middle class and would pass along an extra $800 in taxes to each American.

In contrast to Cantor's charge, Obama planned to provide billions of dollars in federal lending aid aimed at struggling small business owners.

The broad package of measures to be announced Monday includes $730 million from the stimulus plan that will immediately reduce small-business lending fees and increase the government guarantee on some Small Business Administration loans to 90 percent, according to officials briefed on the plan who demanded anonymity because the announcement had not been made.

Members of both parties, however, joined in the criticism of troubled insurance giant American International Group, who paid out tens of millions in bonuses despite posting the largest corporate loss in history during the fourth quarter of last year.

Summers called the payout "outrageous," given AIG has received more than $170 billion in a public bailout and reported a loss of $61.7 billion. Frank said AIG's leaders who approved the bonuses shouldn't stay in power. And McConnell said the payments do little to boost public confidence.

"This is an outrage," McConnell said. "And for them to simply sit there and blame it on the previous administration or claim contract—we all know that contracts are valid in this country, but they need to be looked at."

McConnell appeared on ABC's "This Week." Summers appeared on ABC and on CBS's "Face the Nation." Romer and Cantor appeared on NBC. Goolsbee and Frank appeared on "Fox News Sunday."

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